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Public Provident Fund

Updated on May 17, 2022 , 38951 views

Public Provident Fund (PPF) is a tax-free savings avenue backed by the Central Government. PPF was primarily introduced by the Ministry of Finance in 1968 to inculcate the habit of savings among Indians and also to provide retirement security to the people working in the private security. However, at present, Public Provident Fund is considered to be one of the best tax saving instruments as the interest earned on deposits is not taxable. Also, the deposits made in a Public Provident Fund or PPF scheme can be used to claim tax deductions upto INR 1,50,000 under Section 80C of income tax Act.

Public Provident Fund is one of the most affordable and attractive long-term Investment plan. Usually, most people hesitate to invest in a PPF account due to its long maturity period of 15 years.

PPF

But, it has its own benefits as well. Let’s explore the features of PPF account and the various benefits it offers.

PPF Account - Key Features

PPF Interest Rate

The interest rate on Public Provident Fund is 7.1% (01.04.2020)

Scheme Duration

The duration of a PPF scheme is 15 years. The account can also be continued for 5 years after the maturity at every renewal, additionally, deposits may or might not be made.

Minimum & Maximum Deposit

The minimum amount that can be deposited in a PPF account is INR 500 per year while the maximum amount is INR 1,50,000 per year.

Deposit Installments

One can invest money in a PPF account in a single installment per year or maximum upto 12 installments in a year.

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Mode of Deposit

Investing in PPF is simple and convenient. There are various modes of investing that include, cash, cheque, DD, PO or online funds transfer.

PPF Withdrawal

The PPF withdrawal rules include, complete withdrawal of funds is allowed only after maturity. But, partial withdrawals are allowed every year after completion of 7 years.

Lock-in Period of PPF

The lock-in period of PPF account is 15 years.

Tax Benefits of PPF Account

The interest earned on Public Provident Funds is tax-free. Additionally, the deposits made are liable for tax deductions under section 80C of the Income Tax Act.

Facility of Loans

Yes, loans can be taxed against funds held in a PPF account from 3rd year to the 6th year.

Renewal of PPF Account

An additional extension of a Public Provident Fund is allowed for five years at a time.

Benefits of Public Provident Fund Scheme

Some of the benefits include-

1. Effective Long-Term Investment option

Having a lock-in period of 15 years, Public Provident Fund is an attractive investment to meet your long-term Financial goals. As the interest rate is compounded annually, the returns are relatively higher than that of Bank FDs.

2. PPF Returns are Tax-Free

Another reason for the PPF returns being high is that the interest on PPF and the withdrawals are tax-free. Further, the deposits being tax Deductible these help in tax saving as well. So, this scheme not only ensures high returns but enables you to save tax as well.

3. Beneficial in Retirement Planning

There are certain features that make this investment option beneficial for Retirement planning. These include long tenures of investment, tax-free returns, interest rates compounded annually, and Capital protection. So, investing in PPF is highly recommended to the ones looking for Early retirement planning options.

4. PPF Account in Less Risky

Next benefit of a Public Provident Fund is its safety. The fund, being backed by the Government of India is less risky.

5. Easily Accessible

Lastly, opening a PPF account is very easy. We can open it at public banks or post offices, nationalised banks, and selected private banks. Also, one can open an online PPF account as well.

Public Provident Fund Calculator

Using a ppf calculator to estimate the returns can be a big help for planning your investments. For example, if you invest INR 1, 000 per month with the PPF interest rate being 7.1%.

Let’s see how the PPF calculator works:

Yearly Yearly Investment (INR) Balance Amount Rate of Interest
Year 1 12000 12462 462
Year 2 24000 25808 1808
Year 3 36000 40102 4102
Year 4 48000 55411 7410
Year 5 60000 71807 11806
Year 6 72000 89367 17366
Year 7 84000 108174 24172
Year 8 96000 128316 32314
Year 9 108000 149888 41886
Year 10 120000 172992 52990
Year 11 132000 197736 65734
Year 12 144000 224237 80234
Year 13 156000 252619 96617
Year 14 168000 283016 115014
Year 15 180000 315572 135570
  • Maturity Amount - 3,15,572
  • Total Deposit - 1,80,000
  • Total Interest - 1,35,570

So, thinking of a long-term retirement investment that meets your financial goals? Go through the above-mentioned benefits of Public Provident Fund and make a wise decision. Secure your future, invest in PPF!

Disclaimer:
All efforts have been made to ensure the information provided here is accurate. However, no guarantees are made regarding correctness of data. Please verify with scheme information document before making any investment.
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